Institutions, socio-economic models and development: An overview

Institutions, socio-economic modelsand development:

An overview of the literature and a methodology

François COMBARNOUS and Eric ROUGIERUniversity of Bordeaux – GREThA UMR CNRS 5113

The effects of institutions and socio-economicmodels on development: theoretical settings

Why is there so much variety in the institutions andregulations ?

• Facts: Diversity of the national systems of institutions andregulations

• One function / Several forms• China, « western style » ?


How can we assess this diversity?• NIE or NCD: Diversity as an institutional gap / A narrow view on

the diversity of institutional forms / coarse data and overuse ofinstruments

• CPE, VoC: diversity of socio-economic models• but OECD capitalisms / Asian model (Amable, 2003)

• Then, socio-economic models can be defined as original systemsof institutions and regulations that display a long lasting efficiency and support in regard of the objective (and the means) that are valued by the majority of the population


What is the « comparative advantage » of our approach?

• Against the low dimensionality of the benchmark approach toreform, our approach adopts a broad perspective of theinstitutions as systems

• We focus on similarities and differences between institutions and regulation mechanisms across nations regarding: • Competition and labour regulations, finance and corporate governance,

training and education, social protection systems, agriculture and environmental regulations, …

• … and the observable complementarities between these fields • How do they relate one with another? Do they give rise to specific, new or

already known, configurations of capitalism?


Why focusing on emerging economies among all LDCs?• Countries that have experimented original mixes of institutions

and regulations are mostly emerging ones• Institutional divergence does not impede the convergence in

performance• Institutional divergence ⇒ risk diversification for the World

economy• Piecemeal and experimentation vs global reform: accounting for

complementarities

• Useful clues for OECD economies?

The effects of institutions and socio-economicmodels on development: methodological options

Questions and area of study:

• Who (and also what) are the emerging countries ?• Which are the institutional configurations that support countries

emergence ?

• The area of study has to consider all the economies in the world, except for the smallest ones for data availability reasons

Separately considering the different dimensions of emergence…

• Agriculture

• Education system

• Environmental issues

• Competition / Regulation and International integration

• Development financing, financial market and banking system

• Labour market

• Social welfare

Agriculture database

Education database


Exhaustive data collection

Labour market database

Agriculture databasePCA / K-means

MCA / HCAAG1, AG2, …, AGNag

Education database PCA / K-means

MCA / HCAED1, ED2, …, EDNed

Environmental database PCA / K-means

MCA / HCAEV1, EV2, …, EVNev

New “qualitative” cross-section database


… to produce original and relevant classifications of countries, regarding each dimension

►Who are theemerging countries ?

A tool to answer some of our questions

New qualitative cross-section database

MCA / HCA

►Do emerging countries constitute an homogeneousgroup ?

►Is there an« emergence path » ?

►How do they emerge ?

►Are they several« ways » to emerge ?

►One country, oneemergence ?


An example of collected data : the labour market database

For each considered country from Afghanistan to Zimbabwe andfor each available year back to 1980

LABOUR FORCE COMPOSITION

• Labour force participation by gender / age

• Employment to population ratio

• Child labour

• Wage workers in working population

JOB SECURITY AND EARNINGS

• Share of working poor

• Minimum wage

• Work contract protection

• Factory inspectorate

• Share of public employmentFUNDAMENTAL CONVENTIONS ANDCOLLECTIVE BARGAINING

• Ratification of int. labour standards

• Union rights

• Collective bargaining

• Labour troubles

INFORMAL ACTIVITY

• Share of vulnerable employment

• Employment in the informal sector

QUALITATIVE DATABASECountries 2007 "Type "Type of "Type of "Type of "Type of "Type of "Type of "Type of "Type of

of education environmental competition / development financial international labour socialagriculture" system" considerations" regulation" financing" market » integration" market" welfare"

AfghanistanAlbaniaAlgeriaAngolaArgentina……….……….VietnamVirgin Islands (U.S.)Yemen, Rep.ZambiaZimbabweCountries 2006 AG ED EV CR DF FM II LM SWAfghanistan……….Zimbabwe……….……….……….Countries 1980 AG ED EV CR DF FM II LM SWAfghanistan……….Zimbabwe

Less developedcountries

Industrializedcountries

Emergingcountries

F1

F2Who are the

emerging countries ?

Emergingcountries



F1

F2

AG2

DF2

CR1

CR2

CR3

EV1

EV2 ED

3

ED4

ED2

ED1

AG1

AG3

DF1

FM1

FM2

FM3

CG1

CG2

CG3

II1

LM1

SW1

SW3

SW2

II2

II3

II4

LM2

LM3

LM4

How do they emerge ?



Emerging

countries

F1

F2

« Emergence path » ?


IndustrializedcountriesEmerging

countries

F1

F2

« One specific way » ?



Emerging

Countries

Group 1

F1

F2

« Several ways of emergence » ?

Emerging

Countries

Group 2

Emerging

Countries

Group 3



F1

F2« One country / One

emergence process » ?

Emerging country 14

Emerging country 12

Emerging country 2

Emerging country 7

Emerging country 5

Emerging country 1

Emerging country 3

Emerging country 11

Emerging country 1

Emerging country 4

Emerging country 6

Emerging country 1

Emerging country 9

Emerging country 13

Emerging country 10

Possible complementarities between institutions and regulations in the case of LDCs

Labor Social Welfare Education Bank and finance

Trade and FDI Agriculture Environment

Competition on product markets

Coordination and Liberalization

Informal activities

Demand (China)

Skills upgrading

Comparative advantage

Labour and investment

Gains from openness / Protection

Export vs Subsistence

Pollutions and innovations

Labor

Decent labour

Demand support

Skills upgrading

Remittances Deregulation

Volatility

Surplus towards industry

Employment creation via innovation

Social welfare

Fiscal policy

Pension funds Social dumping Redistribution reduction

Informal protections

Reduction of inequalities

Education

Microcredit Skills and comparative advantage upgrading

Productivity, sustainability

Sustainable consumption

Bank and finance Exchange reserves Microcredit Clean development and access to international financing

Trade and FDI Struggle for land Rents from Commodities

Agriculture Pollution deforestation

Institutions, socio-economic models and development: An overview

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